Correlation Between Citizens and Lincoln National

Can any of the company-specific risk be diversified away by investing in both Citizens and Lincoln National at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Citizens and Lincoln National into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citizens and Lincoln National, you can compare the effects of market volatilities on Citizens and Lincoln National and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Citizens with a short position of Lincoln National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens and Lincoln National.

Diversification Opportunities for Citizens and Lincoln National

-0.59

Correlation Coefficient

Citizens  Lincoln National

Excellent diversification

The 3 months correlation between Citizens and Lincoln is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Citizens and Lincoln National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln National and Citizens is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Citizens are associated (or correlated) with Lincoln National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln National has no effect on the direction of Citizens i.e., Citizens and Lincoln National go up and down completely randomly.

Pair Corralation between Citizens and Lincoln National

Considering the 90-day investment horizon Citizens is expected to under-perform the Lincoln National. In addition to that, Citizens is 1.33 times more volatile than Lincoln National. It trades about -0.13 of its total potential returns per unit of risk. Lincoln National is currently generating about 0.09 per unit of volatility. If you would invest  2,554  in Lincoln National on February 1, 2024 and sell it today you would earn a total of  173.00  from holding Lincoln National or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Citizens  vs.  Lincoln National

Citizens

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lincoln National

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln National are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln National is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Citizens and Lincoln National

The main advantage of trading using opposite Citizens and Lincoln National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens position performs unexpectedly, Lincoln National can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lincoln National will offset losses from the drop in Lincoln National's long position.

The idea behind Citizens and Lincoln National pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.